In an increasingly volatile global energy landscape, China, the world’s largest oil importer, relies heavily on cheap crude from sanctioned or geopolitically unstable suppliers to fuel its economy. Venezuela and Iraq together provide a significant portion of these imports, often at below-market prices due to sanctions on Venezuelan oil and competitive prices from heavy Iraqi crude. But what if those supplies were cut off?
China’s Dependence on Venezuelan and Iraqi Oil
China’s crude oil imports reached a record 11.55 million barrels per day (bpd) in 2025, driven by low prices and a build-up of inventories amid a global oversupply. Venezuela supplied about 470,000 to 642,000 barrels per day, accounting for about 4.5% of China’s seaborne imports.
This oil, often heavy Merey crude, came at deep discounts, typically $14-15 a barrel below Brent, and occasionally as much as $21 below, due to U.S. sanctions that restricted Western buyers.
China absorbed 75-80% of Venezuela’s total exports in 2025, benefiting from the sanctions-evasion ecosystem that kept prices low.
Iraq, a more stable supplier without direct sanctions, provided about 1.2 million barrels per day in 2025, or about 10-12% of China’s imports.
While not as cheap as Venezuelan crude, Iraqi oil grades like Basrah Heavy offered competitive prices for China’s independent refiners, which process sour, heavy crudes with tight margins.
Together, these sources provided about 1.7 million bpd in reduced supply, which is critical to China’s energy security and refining economy.
China’s total oil consumption averaged about 15.2 million bpd in 2025 (based on apparent consumption of 760 million metric tons, converting to about 7.3 barrels per ton).
Domestic production contributed about 4.2 million bpd, leaving imports to fill the rest. A loss of 1.7 million bpd would create a significant gap, equivalent to about 11% of consumption or 15% of imports.
China has been building up war reserves in recent years, combining strategic petroleum reserves (SPR) with commercial stocks.
In early 2026, total onshore crude oil inventories stood at about 1.2 billion barrels, covering about 104 days of net imports at 2025 levels.
To break this down:
- Strategic Reserves: About 400 million barrels, managed by the government for emergency needs.
- Commercial Reserves: About 670-800 million barrels, held by refiners and traders, with flexibility to switch.
If China were to lose 1.7 million barrels per day to Venezuela and Iraq, these reserves could theoretically cover the deficit without depleting all reserves.
The calculation is as follows:
Daily gap: 1.7 million barrels per day.
Total reserves: 1.2 billion barrels.
Days to cover the gap (using full reserves): 1,200,000,000 barrels ÷ 1,700,000 barrels per day ≈ 706 days (about 1.9 years).
However, this assumes all reserves are depleted, which is unrealistic, as some reserves are operationally minimal.
More conservatively, using only the SPR (400 million barrels): 400,000,000 ÷ 1,700,000 ≈ 235 days (about 8 months).
If total reserves are depleted at a sustainable rate (e.g., 50% depletion to maintain reserves): About 350–400 days.
These figures do not assume any further adjustments to supply. In practice, China will diversify imports while drawing down reserves, expanding the stockpile.
In addition to onshore storage, China is benefiting from oil already en route. Estimates vary, but significant volumes of sanctioned crude are floating on tankers or in bonded storage.
Of Venezuelan oil alone, 43-52 million barrels were headed east in early 2026. Adding Iranian and other sources, the total oil in transit or floating storage destined for China could reach 100-200 million barrels.
Assuming 150 million barrels in transit (a midpoint based on 50 million Venezuelan barrels + 170 million Iranian, prorated for stocks bound for China).
Gap coverage of 1.7 mbpd: 150,000,000 ÷ 1,700,000 ≈ 88 days (about 3 months).
This volume in transit acts as an immediate buffer, buying time for rerouting or new purchases.
Calculation: Total transit volume ÷ daily gap provides the days to depletion, assuming no new shipments.
Can Russia fill the gap?
Russia has become China’s top oil supplier, exporting about 2 million barrels per day in 2025 – about 20% of China’s imports.
Deliveries rose to 2.07-2.1 million barrels per day in early 2026 as India reduced purchases under US pressure.
Russian crude, often ESPO or Urals grade, is trading at discounts of $5-6 per barrel below Brent, making it a viable substitute for Venezuelan volumes.
However, Russia’s ability to fully compensate for the loss of 1.7 million barrels per day is limited:
: Russia produced 9.3-9.6 million barrels per day in 2025-2026, constrained by OPEC+ quotas (current quota: 9.57 million barrels per day).
Excess capacity is estimated at 0.3-0.5 million barrels per day, well below 1.7 million.
Global OPEC+ excess capacity is mainly located in Saudi Arabia and the UAE (2.5 million barrels per day in total), not in Russia.
To calculate the potential increase: If Russia increases its production by 0.5 million barrels per day (optimistic, ignoring quotas), it only covers 29% of the gap (0.5 ÷ 1.7 ≈ 0.29).
Russia’s exports rely on a “shadow fleet” of old tankers to evade sanctions, with 68% of crude oil being transported by such ships in January 2026.
A greater shift to China means longer routes, especially to the Urals from western ports (via Suez or around Africa), increasing costs and delays.
The Kozmino terminal (eastern exports) is close to capacity, limiting ESPO’s growth.
Recent ship-to-ship transfers in the Red Sea highlight adjustments, but freight rates have increased and vessel availability is limited.
Conclusion
If Russia diverts 0.5 million barrels per day more to China, transportation bottlenecks could add $2-5 per barrel, eroding discounts.
In summary, Russia could realistically add 0.3-0.5 million barrels per day in the short term, filling 18-29% of the gap.
Full replacement? Unlikely without a breach of OPEC+ or major infrastructure upgrades, which could take years.
